With this article we would like to give you an overview of the legal basis, the prerequisites, the processes and the advantages and disadvantages of class actions. We attach importance to understandable language in order to sensitise legal laypersons to the topic.
In addition, we will show you some examples of successful class actions and possible alternatives. We hope that this article will give you a good insight into the topic of class actions and we are at your disposal for further questions and advice.
Table of contents
- Definition and legal basis of a class action
- Advantages and disadvantages
- What are the requirements
- How does a class action proceed?
- Examples of successful class actions
- What types of class action are there?
- Individual action – what is the difference?
- In which cases does a class action make sense?
- In which areas of law is a class action possible?
- Which claims can be asserted through a class action?
- What are the costs of a class action?
- What role does the law firm play in a class action?
- Are there alternatives to a class action?
- Conclusion – Class action as an effective instrument of legal enforcement
- Contact the Herfurtner law firm
Definition and legal basis of the class action
A class action is a legal procedure that enables a group of persons to jointly assert claims against another party. The legal basis for this in Germany is laid down in the Capital Investor Model Case Act (KapMuG) and the Consumer Information Act (VIG). The most important details on the definition and legal basis of the class action are presented below.
- Definition: A class action enables a group of persons to assert their claims against another party jointly in one proceeding.
- Capital Investor Model Case Act (KapMuG): This law regulates the conduct of class actions for capital investors. The provisions of the KapMuG apply to claims by investors arising from the purchase or sale of securities.
- Consumer Information Act (VIG): The VIG enables class actions to be brought for consumers. The provisions of the VIG apply to claims of consumers against companies, for example due to defective products or insufficient information.
- Differences between KapMuG and VIG: While the KapMuG is limited to claims of capital investors, consumers can only assert their claims on the basis of the VIG. In addition, there are differences in the course of proceedings and the requirements for a class action.
- Advantages of class actions: They offer a more effective enforcement of claims, a relief of the courts as well as higher cost savings for the plaintiffs.
- Class actions in other countries: In the USA it is known as “class action” and is frequently used there.
Example: An investor has invested in shares of a company and suffers a financial loss due to false information. With a class action under KapMuG, all aggrieved investors can take action against the company together and assert their claims in a bundle.
Advantages and disadvantages
Class actions offer numerous advantages, but also some disadvantages, which are explained below.
- More effective enforcement of claims: Through such a lawsuit, claims can be bundled and thus asserted more effectively. Even in the case of smaller claims, costs can be reduced through bundling.
- Relief of the courts: Through a class action, several claims are combined into one procedure, which results in a relief of the courts.
- Higher cost savings: Costs can be saved by bundling the claims, as lawyer and court fees are shared among the claimants.
- Less control over the process: as decisions in a class action are made by a representative, individual claimants have less control over the process.
- Possible reduction of individual claims: It may happen that the individual claims of the plaintiffs are lower due to bundling.
- Higher prerequisite requirements: Certain requirements must be met for a class action, such as a sufficient number of claimants. This may make it more difficult to conduct such an action.
Example: A group of consumers buys a defective product and suffers damage as a result. With a class action under VIG, consumers can take action against the company together and assert their claims in a bundled manner. By bundling their claims, they can save costs and increase their chances of successfully asserting their claims.
What are the requirements for a class action?
In order for a class action to be carried out, certain requirements must be met. The most important requirements are explained below.
- Similarity of the claims: The claims of the plaintiffs must be similar, i.e. they must arise from the same facts and relate to the same legal ground.
- Sufficient number of plaintiffs: For a class action, there must be enough plaintiffs to enable effective bundling. The exact number varies depending on the law and the type of action. For example, under the Capital Investor Model Case Act (Kapitalanleger-Musterverfahrensgesetz – KapMuG), at least ten investors must be affected.
- Joint representative: The claimants must appoint a common representative to represent them in the proceedings and make decisions.
- Common subject matter: The claims must have the same subject matter, i.e. they must relate to the same facts or the same subject matter of the dispute.
- Timely filing: The plaintiffs must file their claims in time, i.e. they must declare their participation in the class action within a certain period of time.
It is important to note that the specific requirements may vary depending on the law and the type of class action. In addition, there are specific requirements for documentation and proof of claims.
Example: A group of investors invests in shares of a company that later suffers a price loss due to misinformation. In order to assert their claims, the group must meet the requirements for a class action under KapMuG. These include a sufficient number of affected investors, similar claims, a common representative and timely registration of the investment.
How does a class action proceed?
Such an action consists of various phases and procedures. The following is a rough overview of the process of a class action.
- Preliminary examination and preparation: First, it is examined whether the requirements for a class action are met. For this purpose, the claims of the plaintiffs are examined and documented. In addition, a common representative is appointed and the plaintiffs register their participation in the action.
- Filing of the lawsuit: The lawsuit is filed with the competent court. The facts of the case are described and the claims of the plaintiffs are set out. It must also be stated which plaintiffs are affected by which claims.
- Opening of proceedings: The court examines the admissibility of the class action and decides whether to open the proceedings. In doing so, it also examines whether the requirements for such an action are met and whether the plaintiffs are sufficiently represented.
- Bundling order: After the proceedings have been opened, the court issues a bundling order. Here, all claims of the plaintiffs are bundled and a joint trial is conducted.
- Main hearing: In the main hearing, the claims of the plaintiffs are heard and decided. Evidence is presented and witnesses are heard.
- Judgment: After the trial, the court issues a judgment in which it decides on the plaintiffs’ claims. It can dismiss the claims or grant them.
- Appeals: Appeals can be lodged against the court’s judgment. The plaintiffs have various options for this, such as an appeal.
It is important to note that the process of a class action may vary depending on the type of claim and the applicable law. In addition, the process may vary within the different phases.
Example: A group of consumers brings a class action under the Consumer Information Act (VIG) to assert their claims against a company. After preliminary examination and preparation, the lawsuit is filed with the competent court.
After the proceedings have been opened, the court issues a bundling order in which the claims of the plaintiffs are bundled. At the main hearing, evidence is presented and witnesses are heard. After the hearing, the court issues a judgment in which it decides on the plaintiffs’ claims. The judgement can be appealed.
Examples of successful class actions
There have already been some successful class actions in Germany. Some examples are:
VW emissions scandal: In the course of the VW emissions scandal, numerous class actions were filed by affected motorists and shareholders. In some cases, the plaintiffs were awarded damages.
Prokon: Investors have filed class actions with the insolvent Prokon Group. In 2018, the plaintiffs were awarded a settlement of around 340 million euros.
Cum-Ex scandal: In the Cum-Ex scandal, investors were refunded billions in taxes through share transactions. Some affected investors have successfully filed class actions.
P&R insolvency: As a result of the insolvency of the P&R Group, investors have filed class actions. In 2021, the plaintiffs were awarded damages totalling around 215 million euros.
Niki insolvency: After the insolvency of the airline Niki, affected passengers filed class actions. The claims were for compensation for cancelled flights. Some plaintiffs were able to successfully assert their claims.
It is important to note that successful class actions are not only possible in large cases like the ones mentioned above, but also in smaller cases of securities fraud or when claiming damages for defective products or services.
What types of class actions are there?
There are different types of class actions that can be used depending on the nature of the claims and the individuals involved. The most important types are explained below:
- Capital Investor Model Case Act (KapMuG): The KapMuG enables investors to assert their claims in connection with the purchase or sale of securities in a bundled manner. The proceedings are conducted by a common representative.
- Consumer Information Act (VIG): The VIG enables consumers to make their claims against companies in connection with defective products or services in a bundled manner. The procedure is managed by a common representative.
- Musterfeststellungsklage: The Musterfeststellungsklage enables consumers to assert their claims against companies in a bundled manner. This involves claims that affect a large number of consumers, for example in the case of violations of data protection law or exhaust gas manipulation.
- Joint action: A joint action allows several people to jointly assert their claims against another party. Unlike other class actions, there is no common representative. Each plaintiff must assert their claims themselves.
It is important to note that the specific types of class actions may vary depending on the law and the country. There are also other names for similar procedures, for example class actions in the USA.
What is the difference between a class action and an individual action?
The main difference between a class action and an individual action is that in a class action several people combine their claims in a common procedure, whereas in an individual action each plaintiff conducts his or her procedure separately from the other plaintiffs. The most important differences are explained below:
- Bundling of claims: In a class action, the claims of the plaintiffs are bundled and dealt with in one procedure, whereas in an individual action, each plaintiff conducts his or her own procedure.
- Cost savings: By bundling the claims in a class action, costs can be saved because lawyer and court fees are shared among the plaintiffs. In an individual action, each plaintiff must bear the costs of his or her own proceedings.
- More effective enforcement of claims: Through a class action, claims can be bundled and thus asserted more effectively. Even if the claims are smaller, the costs can be reduced by bundling. In an individual action, success depends on the individual claims of the plaintiff.
- Less control over the process: In a class action, the individual plaintiffs have less control over the process because the decisions in a class action are made by a common representative. In an individual claim, the claimant has full control over the process.
- Possible reduction of individual claims: In a class action, the individual claims of the plaintiffs may be smaller due to bundling. In an individual action, the plaintiff can assert his or her claims individually.
It is important to note that the decision whether to pursue a class action or an individual claim depends on the individual circumstances of the case and may be influenced by various factors. A careful assessment of the options and risks should be carried out in any case.
In which cases is a class action useful?
A class action makes sense in certain cases, especially when it comes to claims that affect a large number of people. The following are some examples where a class action may make sense:
- Investment fraud: When multiple investors are affected by a fraud committed by a company or individual, a class action may make sense. In this case, the claims can be bundled and thus asserted more effectively.
- Consumer law: In the case of breaches of consumer law, for example defective products or misleading advertising, affected consumers can bundle their claims in a class action.
- Environmental law: If several people are affected by environmental pollution or damage, a class action can make sense. In this case, the claims can be bundled and thus asserted more effectively.
- Data protection law: In the case of breaches of data protection law, affected persons can bundle their claims in a class action, for example in the case of unauthorised disclosure of personal data.
- Labour law: If several employees are affected by an employer, for example through wrongful dismissal or wage fraud, a class action can make sense.
It is important to note that a class action only makes sense if the persons affected are sufficiently numerous and the claims are similar. In addition, the costs and risks of such a lawsuit should be carefully weighed. In many cases, it may make more sense to bring an individual action or to settle out of court.
In which areas of law is a class action possible?
In principle, a class action is possible in all areas of law in which a large number of persons are affected by a damage or a common claim exists. Typical areas of law in which class actions occur are, for example, capital investment law, consumer law, labour law, environmental law or data protection law. However, there are also other areas of law in which such actions can be brought.
The exact requirements and procedural rules for class actions can vary depending on the legal field. In Germany, for example, the regulations for this are set out in the Capital Investor Model Case Act (KapMuG), the Consumer Information Act (VIG) or the Act on Model Complaints.
What claims can be asserted through this?
In principle, all claims that are jointly or similarly affected by a large number of persons can be asserted through a class action. These include, in particular, claims under capital investment law, consumer law, labour law, environmental law or data protection law.
Claims for damages: Claims for damages can be enforced, for example, in the case of defective products, breaches of consumer law or environmental damage.
Claims for repayment or reversal: Claims for repayment or reversal can be enforced, for example, in connection with fraudulent capital investments or in the case of unlawful terminations.
Claims for declaratory relief: Claims for declaratory relief can be enforced, for example, in connection with data protection law or in disputes about employment relationships.
Claims for injunctive relief: Claims for injunctive relief can be asserted, for example, in the case of infringements of copyright law or infringements of competition law.
What are the costs of such a claim?
The costs of a class action can vary greatly depending on the proceedings and the scope and depend on various factors, such as the number of persons involved, the amount in dispute, the duration of the proceedings and the remuneration of the joint representative. Some cost factors are explained in more detail below:
- Legal fees: Legal fees for a class action can vary depending on the lawyer and the hourly rate. Often the costs are calculated per hour.
- Court costs: The court costs for a class action can also vary depending on the proceedings and the amount in dispute. In particular, the costs for experts and expert opinions can be high.
- Remuneration of the joint representative: The joint representative who leads the class action receives remuneration which can vary depending on the proceedings and the amount in dispute. Both a fixed remuneration and a success fee can be agreed.
- Expenses: Expenses such as travel costs, postage or telephone charges may be added to the costs of a class action.
It is important to note that in a class action the costs are shared among the persons concerned, which may result in lower costs per person than in an individual action. However, it is advisable to carefully weigh up the costs and risks of a class action and to reach a transparent cost agreement with the joint representative in advance.
What role does the law firm play in a class action?
A law firm can play an important role in a class action, especially in advising and representing the affected individuals. Some of the roles and responsibilities of law firms in this context are explained below:
- Advice and information: a law firm can advise data subjects on the possibilities and risks of a class action and provide information on the requirements and procedural rules.
- Joint representative: In some proceedings, a law firm can act as joint representative of the affected persons. In this case, the law firm takes the lead in the class action and represents the common interests of the affected persons.
- Filing the lawsuit: A law firm can file the class action with the court and assist the plaintiffs in preparing and assembling the necessary documents and papers.
- Representation in court: A law firm can represent the affected persons in the proceedings in court and assert their claims against the opposing party.
- Communication and information: A law firm can inform the persons concerned about the course of the proceedings and any settlement offers and take over communication with the opposing side.
It is important to note that the exact role of the law firm in a class action depends on a number of factors and may vary from case to case. A careful assessment of the possibilities and risks should be carried out in any case.
Are there alternatives to the class action?
There are alternatives to a class action, depending on the type of litigation and the circumstances of the individual case. Here are some of the most common alternatives:
Individual actions: individual actions can be an alternative to class actions in many cases, especially if the claims are not of the same nature or the number of affected individuals is too small. Each affected individual files his or her own lawsuit.
Class settlements: In some cases, class settlements can be an alternative to class actions. In this case, the affected individuals agree on a joint settlement with the opposing party out of court.
Mediation: Mediation can be an alternative to class action, especially if the aim is to reach an out-of-court settlement. Here, a neutral mediator tries to reconcile the interests of both parties and find a solution.
Consumer centres: Consumer centres can be an alternative to class actions in many cases. Here, affected consumers can turn to the consumer centres for advice or seek an out-of-court settlement.
It is important to note that the choice of the right alternative to a class action depends on the individual circumstances of the case. A careful assessment of the options and risks should be carried out in any case.
Conclusion – Class action as an effective instrument of law enforcement
In summary, class action is an effective instrument of legal enforcement, especially in cases where a large number of persons are affected or a common claim exists. By bundling the claims, the affected persons can enforce their rights more effectively and better position themselves vis-à-vis the opposing party.
However, a class action does not make sense in all cases and should only be considered after careful examination of the possibilities and risks. In addition, the costs and procedural risk of a class action can be high, which is why a transparent cost agreement with the joint representative is important.
As a law firm, we recommend our clients to inform themselves about the possibilities and risks of a class action at an early stage and to conduct a careful examination. We support our clients in effectively and successfully enforcing their claims, whether through a class action or another alternative means of legal enforcement. Our expertise and experience in civil law and litigation enables us to provide our clients with high quality advice and representation.
Contact Herfurtner Law Firm
If you would like to contact Herfurtner Law Firm, you can do so in several ways:
Website: Visit our website and use the contact form to leave us a message.
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Phone: Call us at +49 (0)40 228 597 960 – Hamburg, phone +49 (0)89 215 462 180 – Munich or phone +49 (0)69 348 689 81 – Frankfurt a. M. to make an appointment for a personal meeting.
Locations: Contact us at our locations in Munich, Hamburg or Frankfurt am Main.
Our team of experienced lawyers will be happy to advise and represent you in all matters of civil law and litigation, including the enforcement of claims through class actions. We look forward to hearing from you.